A piece of equipment costs $30,000,and is expected to generate $8,500 of annual cash revenues and $1,500 of annual cash expenses.The disposal value at the end of the estimated 10-year life is $3,000.Ignoring income taxes,the payback period is:

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the net annual cash inflow. The net annual cash inflow is $8,500 (revenues) - $1,500 (expenses) = $7,000. The payback period is $30,000 / $7,000 = 4.29 years.

A Piece of Equipment Costs $30,000,and Is Expected to Generate